Stakeholder pension pot not part of estate?

clairehi

I wrote to Alliance Trust asking for a valuation for probate of my late dad's stakeholder pension pot.

They phoned me today to say that it would not form part of his estate and their normal procedure was to sell the shares as soon as they were informed of the death.

I was quite puzzled by this - as why should a private money purchase pension fund not form part of someones estate? My dad owned the investments in that pot just like he owned the contents of his ISAs and PEPs.

It is not like an occupational pension scheme when any "death benefits" are paid at the trustees discretion.

Have Alliance Trust got this wrong? I have also told them emphatically NOT to sell anything at the moment.

dunstonh

I was quite puzzled by this - as why should a private money purchase pension fund not form part of someones estate?

Pension funds are in trust.

My dad owned the investments in that pot just like he owned the contents of his ISAs and PEPs.

No he didnt. He didnt own the investments in the ISAs and PEPs. The ISA/PEP manager did. However, he owned the ISA and PEP.

However, in the case of pensions it is a master trust that is held on his behalf.

Have Alliance Trust got this wrong?

No.

I have also told them emphatically NOT to sell anything at the moment.

They shouldnt take any notice of you as you have no say in this matter. (that reads harsher than I meant but legally you have no standing to tell them to do something different)

I'm not sure why you would want the proceeds part of the estate anyway. Having the pension fund outside of the estate is one of the benefits of pensions. It avoids IHT in cases like this and doesnt rely on a will (or not) to pay out the proceeds.

Alliance Trust should sell all the investments and issue a cheque to the beneficiary once they have been supplied with the death certificate.

note: I am assuming uncrystallised benefits.

Blowsy

If you father had begun drawing his pension via pension commencement lump sum, annuity, drawdown etc then the crystalised benefits would have formed part of his estate for IHT but any uncrystalised benefits would not as above.

clairehi

OK well thats something new - I had not twigged that stakeholder/pension funds pots were treated in the same way as occupational pension benefits payable on death. I guess the pension trustees must be able to use their discretion to decide who gets the money then?

It makes no difference to me either way as there is no IHT to pay, I am just keen to ensure I complete the forms for HMRC correctly.

From an IHT POV, if you had capital that you wanted to pass on to beneficiaries bypassing your estate, should you just stick it in a pension and never buy an annuity then?

The provider were happy to put a hold on selling the shares for now. THis does make me wonder if the ISA/PEP providers are also going to automatically immediately liquidate everything though.

dunstonh

I guess the pension trustees must be able to use their discretion to decide who gets the money then?

Yes they can. Generally they will follow the nomination of beneficiary that your father gave them unless it is considered to be unfair. i.e. dependent family but beneficiary is third party. In those cases they will usually overrule.

I am just keen to ensure I complete the forms for HMRC correctly.

Pension doesnt go on there.

From an IHT POV, if you had capital that you wanted to pass on to beneficiaries bypassing your estate, should you just stick it in a pension and never buy an annuity then?

Yes. However, there is the risk you dont die before age 75.

toffeegirl

dunstonh wrote: »

Yes they can. Generally they will follow the nomination of beneficiary that your father gave them unless it is considered to be unfair. i.e. dependent family but beneficiary is third party. In those cases they will usually overrule.

Question: Someone takes out a pension, names siblings as beneficiaries. Meets somone (not married), has child, dies.

If the beneficiary list is not changed, can it be challenged in favour of the child?